This article continues to explore the most critical preliminary legal considerations that international enterprises must consider before entering the Tanzanian market. You can find the first installment of the ongoing series here.
Trademarks, copyrights, service marks, patents, plant-breeders’ rights, utility models, and industrial designs are examples of intellectual property rights (IPRs) that have evolved during the last several decades. IPRs are protected by Tanzanian law.
As a result, while attempting to sell a product or service in Tanzania, a foreign company must first determine what intellectual property is essential, then register and secure the service or product with IPRs not previously registered in Tanzania.
It must be emphasized that Tanzania Mainland and Tanzania Zanzibar have separate intellectual property laws. Patent registration in Tanzania is governed by the Patents Registration Act, Cap 217 (R.E. 2002), while patent registration in Tanzania Zanzibar is governed by the Zanzibar Industrial Property Act, 2008.
Aside from intellectual property protection, examine if digital trading is foreseen and whether acquiring a dot(.)tz domain name is appropriate.
A foreign corporation and its Tanzanian business partner, in particular, must take sufficient precautions to keep their own sensitive information private and preserve confidential information, trade secrets, and intellectual property.
In this regard, ensuring that the non-disclosure agreement (NDA) says that all non-public information supplied is classified, regardless of whether it is labeled confidential or disclosed, is a best practice for releasing sensitive information.
Tanzania has some of the strictest foreign exchange controls in the world. Despite the fact that overseas investors are given priority when it comes to receiving foreign exchange loans from financial institutions, regulation 6 of the Banking and Financial Institutions (Foreign Exchange Exposure Limits) Regulations 2014 states:
A bank or financial institution may not lend in a foreign currency unless (a) the borrowers have foreign cash income or have taken other measures to mitigate exchange rate risk, and (b) foreign exchange credit facilities are offered to borrowers who operate and invest in the United Republic.
The following transactions trigger a statutory duty under rule 5 of the Anti-Money Laundering (Electronic Funds Transfer and Cash Transactions Reporting) Regulations, 2019, in a single transaction:
- Any Tanzanian Shilling or foreign currency transaction worth more than $10,000; and
- Any Tanzanian Shilling or foreign currency electronic funds transfer (EFT) worth more than $1,000.
The applicable bank, auditor, attorney, regulator, notary, or other ‘reporting person’ must notify the transfer to the Financial Intelligence Unit once the reporting duty has been triggered.
As a result, a foreign company should consider whether Tanzania’s existing foreign exchange control legislation will affect its anticipated transactions in the country.
Regarding taxation, a foreign business may be subject to Tanzanian income tax on certain Tanzania-sourced income, depending on the type of the transaction or agreement. In addition, whenever a foreign company conducts business in Tanzania, it establishes a permanent establishment (PE)/branch.
A PE is defined as:
- A location where the foreign business conducts business via a dependent agent.
- A location where the foreign business has used or implemented sizable tools or equipment or is in the process of doing so.
- A location where the foreign business has been involved in a construction, assembly, or installation project for six months or more, including where the foreign business is undertaking managerial activities relating to that project.
The PE’s earnings are taxed at the standard rate of 30% on net income or 5% of sales for management and technical service providers to mining, oil, and gas companies. In addition, the PE is liable to a ten percent tax on “repatriated income.”
Tanzanian income tax may be liable for a foreign tax credit under the tax regulations of the nation in which the foreign company is registered. The treaty controls relief when income tax is imposed in a nation with which Tanzania has a double tax treaty.
In addition, VAT will be charged on all taxable services delivered to or imported into Mainland Tanzania. VAT is charged at a regular rate of 18%. Imported items are subject to VAT and any customs and excise duties, which must be paid at the time of importation.
A foreign company must be aware of these concerns ahead of time. Tax difficulties, in particular, can be complicated, and the effects vary based on the transaction or arrangement.
To improve day-to-day operations and help our clients achieve long-term business goals, Shikana Group partners with clients to tackle complex legal questions proactively. We focus on compliance in the following areas: employment, mining, oil and gas, technology, gaming, corporate, and investment management.